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The Friday Debate: Is the Uncarrier model the future of phone contracts?

We are all mobile geeks, here at Android Authority. We love everything with a power button. We like to comment the latest news and endlessly argue over which phone is better. On the Friday Debate, we pick a hot issue and proceed to discuss it. Join us!

“Stop the bullshit!” said T-Mobile’s colorful CEO John Legere on Tuesday. After months of speculation and leaks, the magenta carrier finally unveiled its Uncarrier strategy. Legere was referring of course to the pricing model of American carriers, which T-Mobile is decided to turn on its head. Uncarrier means that T-Mobile won’t subsidize phones anymore. Customers will pay their devices, either when signing up for the contract or through monthly installments. But is this new way of selling services a viable business for T-Mo? Will the no subsidy model spread in the US, or is it just a false alarm?

At this week’s Friday Debate, we ask: Is the Uncarrier model the future of phone contracts?

Over the last year or so, there has been a lot of talk of no-contract plans in the United States. Companies like Straight Talk and PlatinumTel are gaining a loyal following of customers who enjoy all the services of more expensive carriers at much less of a cost. It isn’t mainstream yet, but it’s gaining traction.

This is why T-Mobile’s move to no-contracts is so brilliant. As much as our audience may dislike this analogy, it’s a lot like the release of the iPhone right when smartphones were gaining mainstream attention. Similarly, no-contract plans are gaining traction, but T-Mobile will be making them mainstream. Whether or not it’ll increase their customer base remains to be seen. However, I would not be surprised to see the other carriers in the US shoring up their no-contract offerings and giving the US much better no-contract options than we’ve ever seen before. The age of contract plans is coming to an end and T-Mobile was just smart enough to cash in on it first.

Most places in the world emphasize the contractless approach. I think it’s smart of T-Mobile to go this way. I also like that they are bringing a non-subsidy model for reducing up-front device costs. It gives the consumer a lot better visibility into the fact that they are paying $X per month for service and some separate $Y per month for the device.

I think where they are tripping up is in their marketing materials. They are focusing entirely on the ‘unlimited’ marketing but ignoring the fact that most people don’t care about that. It’s especially a problem for the ‘base” portion of the plan. $50 per month gets you unlimited minutes and texts. People are using increasingly fewer minutes and non-SMS based texting (Google Voice or like a thousand other options). T-Mobile still has options that are not unlimited minutes and texts (at least according to their customer service response to my G+ post asking about it), but they don’t appear anywhere on their website or in their marketing materials. I know at least for me, the new pricing (with that $50 base cost) is more expensive that I pay right now for my (on-contract) T-Mobile service.

Marketing the unlimited everything plan at $70 is great, but it’d be just as useful to know that consumers can get an ‘everything they need’ plan for more like $40 or $50 a month. Showing off the lower end of the pricing spectrum would put the company in a position to compete on price with the likes of Cricket and Metro PCS and the high end providers like Verizon and AT&T at the same time. Right now, they are really only targeting that higher end with their marketing.

T-Mobile’s move to re-brand themselves as the ‘UnCarrier’ aligns their non-contract approach with the rest of the world. This approach has been successful outside of the United States for quite some time. John Legere put it best when he said “”Customers love smartphones, everyone hates contracts”.

While T-Mobile’s methods might be great on paper, when it comes to overall coverage, they still don’t have that large of a footprint compared to their competitors. As T-Mobile continues to gain traction, such as their Metro PCS acquisition and LTE rollout, hopefully we’ll see their “UnCarrier” methods shake-up the mobile industry here in the US. Someone needs to do something to advocate change. I think T-Mobile might just be the company to do it.

Well, the rest of the world is following this system, so why not T-Mobile? They definitely know what they are doing as evidenced by John Legere’s newly found swagger and confidence. As long as T-Mobile puts their money where their mouth is and start actively promoting the potential savings to be had after switching to their new plans, I feel consumers will start to consider the switch sooner rather than later. They have the plans, they now have the phones (the iPhone 5 and all the 2013 flagships including the HTC One and the Samsung GS4 will be making an appearance on the carrier), all they now need is the coverage.

People are not going to switch unless T-Mobile provides excellent coverage and speeds in their area; as they keep improving their network, the reasons to keep ignoring them will continue to decrease.

T-Mobile’s uncarrier model is the future, but I doubt it’s going to shake up the wireless industry in the U.S. right away. The mobile operator is offering a lot of nice things that will no doubt attract a truckload of customers, but as +Derek Ross said, their footprint isn’t that large compared to their competitors.

The model already works outside of the U.S., and there’s no doubt that it’ll shake things up here when T-Mobile is able to better their coverage. T-Mobile can offer all of the nice discounts they want, but it’s not going to shake things up until their coverage gets better.

When T-Mobile gets coverage on par with AT&T and Verizon, the uncarrier model will really take off. Who knows, it may even force AT&T and Verizon to start switching things up.